With oil trading back under $100 a barrel and to the lowest levels in three months, many across Wall Street are starting to walk away from the energy trade. It and health care been the only big winners this year. Those who walk away now may do so at their own peril, as the supply and demand balance is extremely delicate now. Any major disruption could make the black gold skyrocket.
J.P. Morgan’s Equity Strategist Marko Kolanovic, who was ranked as the number one equity-linked strategist in last year’s Institutional Investor survey, is very positive on energy and commodities as a whole. He sees the recent pullback as an opportunity for investors to add or initiate positions. He also sees the possibility for Brent crude to go to $190 a barrel, even to skyrocket to $380 a barrel if there was a cut of 5 million barrels per day.
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We screened our 24/7 Wall St. energy research database looking for the highest yielding stocks in the energy and energy master limited partnership (MLP) universe. These seven are all rated Buy and come with among the highest dividends in the sector.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Antero Midstream
With shares trading under $10 apiece, this very well-run company offers a huge total return package. Antero Midstream Corp. (NYSE: AM) owns, operates and develops midstream energy infrastructure. It operates through two segments.
The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collects and processes production from Antero Resources’ wells in West Virginia and Ohio.
The Water Handling segment delivers fresh water and offers other fluid handling services, such as wastewater transportation, disposal and treatment, as well as high-rate transfer services.
Antero Midstream stock investors receive a 9.97% distribution. Wells Fargo recently lifted its $12 target price to $13. The consensus target is $10.71, and shares closed Tuesday at $9.03 apiece.
BP
This is one of the premier European integrated oil giants and top Wall Street analysts are very positive on the shares. BP PLC (NYSE: BP) engages in the energy business worldwide. It produces and trades in natural gas; offers biofuels; operates onshore and offshore wind power and solar power generating facilities; and provides de-carbonization solutions and services, such as hydrogen and carbon capture, usage and storage.
BP is also involved in the convenience and mobility business, which manages the sale of fuels to wholesale and retail customers, convenience products, aviation fuels, and Castrol lubricants. It is involved in refining, supply and trading of oil products, as well as operation of electric vehicle charging facilities. In addition, it produces and refines oil and gas, and it invests in upstream, downstream and alternative energy companies, as well as in advanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage areas.
Shareholders receive a 4.80% yield. The Goldman Sachs price target for domestic shares of BP stock is $45. The $37.92 consensus target is closer to the most recent trade at $26.88.
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Exxon Mobil
Despite the huge rally in oil, this mega-cap energy leader trades at levels printed in 2019 and offers investors an excellent entry point now. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Top Wall Street analysts expect Exxon to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.
The company pays investors a 4.17% dividend, which will continue to be defended. BofA Securities has a $120 price target. The consensus target for Exxon Mobil stock is lower at $102.67, and shares closed on Tuesday at $84.50.
24/7 Wall St.MPLX
This is the top holding for the Alerian MLP energy exchange-traded fund. MPLX L.P. (NYSE: MPLX) is primarily engaged in crude oil and refined products transportation and terminaling in the U.S. Midwest and Gulf Coast regions, as well as natural gas gathering and processing in the northeast from its prior acquisition of MarkWest Energy in 2015. MPLX was formed by independent U.S. refiner Marathon Petroleum.
The company’s assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks and associated piping; and crude and light-product marine terminals. It also owns crude oil and natural gas gathering systems and pipelines, as well as natural gas and natural gas liquids (NGL) processing and fractionation facilities in key U.S. supply basins.
Investors receive a 9.70% distribution. UBS’s $40 price target compares with a $37.50 consensus target. Tuesday’s closing share price for MPLX stock was $29.08.
Phillips 66
This extremely diversified energy company has a long and successful operating history, and shares have backed up nicely. Phillips 66 (NYSE: PSX) operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company holds many of these assets within its MLP, Phillips 66 Partners.
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The company benefits from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that are not ideal MLP assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.
Phillips 66 remains a top refining idea across Wall Street, where many continue to see headroom for incremental capital returns. Most analysts are very constructive on a positive rate of change at Refining in 2022 at the company. In addition, they continue to see attractive non-refining value in the other segments.
Investors receive a 4.82% dividend. The Phillips 66 price target at Wells Fargo is $127, well above the $115.39 consensus target. Shares closed at $80.51 on Tuesday.
24/7 Wall St.TotalEnergies
This French integrated giant is another great way to play an energy rally from the European side. TotalEnergies S.E. (NYSE: TTE) operates as an integrated oil and gas company worldwide. Its Exploration & Production segment engages in oil and natural gas exploration and production activities in approximately 50 countries.
The Integrated Gas, Renewables & Power segment engages in the liquefied natural gas (LNG) production, shipping, trading and regasification activities; trading of liquefied petroleum gas (LPG), petcoke and sulfur, natural gas and electricity; transportation of natural gas; electricity production from natural gas, wind, solar, hydroelectric and biogas sources; energy storage activities; and development and operation of biomethane production units, as well as provides energy efficiency services.
The Refining & Chemicals segment refines petrochemicals, including olefins and aromatics; and polymer derivatives, such as polyethylene, polypropylene, polystyrene and hydrocarbon resins, as well as biomass conversion and elastomer processing. This segment also engages in trading and shipping crude oil and petroleum products.
The Marketing & Services segment produces and sells lubricants; supplies and markets petroleum products, including bulk fuel, aviation and marine fuel, special fluids, compressed natural gas, LPG and bitumen; and provides fuel payment solutions. It operates approximately 15,500 service stations.
TotalEnergies stock comes with a 4.87% dividend. BofA Securities has set an $80 price target, while the consensus target is just $64.24. The shares closed on Tuesday at $48.35.
Williams Companies
This top energy company is a solid pick for investors who are more conservative and looking for exposure to LNG. Williams Companies Inc. (NYSE: WMB) operates as an energy infrastructure company primarily in the United States.
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Its Transmission & Gulf of Mexico segment comprises Transco and Northwest natural gas pipelines, as well as natural gas gathering and processing, and crude oil production handling and transportation assets in the Gulf Coast region. The Northeast G&P segment engages in the midstream gathering, processing and fractionation activities in the Marcellus Shale region, primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio.
The West segment comprises gas gathering, processing and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of South Texas, the Haynesville Shale region of northwest Louisiana and the Mid-Continent region, which includes the Anadarko, Arkom, and Permian basins. It also includes NGL and natural gas marketing operations, as well as storage facilities.
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